"Those among the rich who are not, in the rigorous sense, damned, can understand poverty, because they are poor themselves, after a fashion— they cannot understand destitution. Capable of giving alms, perhaps, but incapable of stripping themselves bare, they will be moved, to the sound of beautiful music, at Jesus’s sufferings, but His Cross, the reality of His Cross, will horrify them." Léon Bloy

18 July 2013

COMEX Registered Gold Falls To Another New Low Ahead of Option Expiration and August Delivery

Registered gold on the COMEX falls to another new low for this bull market, to below 30 tonnes.

"Tonight, the Comex registered or dealer inventory of gold lowers again and remaining below the 1 million oz mark to 950,441.152 oz or 29.56 tonnes.

This is dangerously low especially when we are coming up to the August delivery month. Remember in June we had almost 31 tonnes of gold stand for delivery."

Perhaps I am missing something but one has to wonder what goes through someone's mind who is short into a market structure such as this, wherein the ability to deliver into demand appears to be increasingly impractical. Do they think that they are operating on insider information? Are they?

Or is this just another example of reckless disregard, fostered by large bonuses playing with other people's money?

If gold starts to run, the ensuing rush to the exits could be rather impressive.

Nick of Sharelynx.com does a rough calculation of the open interest/registered or dealer's gold. The number of owners per ounce is up to a bull market high of 46 claims for every ounce registered as deliverable. There is a chart of this below.

Granted that this is not a realistic expectation, that everyone would stand for delivery, but it is an interesting metric that shows the relative balance between paper claims and physical reality. No wonder the Gold Forwards have been negative for the past nine days.

Let's see what happens. Confidence in the US commodities business has been racked by scandal after scandal, from price fixing to the theft of customer accounts. Little enough effort seems to have been made to reform it, to make it more transparent and efficient in price discovery. The attitude seems to be that if you don't trust the markets, so what?

I am not saying that they will not be able to finesse their way through August. There are plenty of ways to do it, higher prices being the text book example. But one has to wonder how long they can keep this up, especially if the storms in the currency markets start blowing come November.

Le Propriétaire

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Need Little - Want Less - Love More

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery.

"In the Incarnation the whole human race recovers the dignity of the image of God. Thereafter, any attack even on the least of men is an attack on Christ, who took on the form of man, and in his own Person restored the image of God in all. Through our relationship with the Incarnation, we recover our true humanity, and at the same time are delivered from that perverse individualism which is the consequence of sin, and recover our solidarity with all mankind." Dietrich Bonhoeffer

"A credibility trap is when the managerial functions of a society have been sufficiently compromised by corruption so that the leadership cannot reform, or even honestly address, the problems of that system without implicating a broad swath of the powerful, including themselves.

The moneyed interests and their aspirants tolerate the corruption because they have profited from it, and would like to continue to do so. Discipline is maintained by various forms of soft financial rewards and career and social coercion."

These are personal observations about the economy and the markets. In providing information, I hope this allows you to make your own decisions in an informed manner, even if it is from learning by my mistakes, which are many. As a standing policy I never provide individual investment advice to anyone. I will only occasionally disclose my personal positions for purposes of illustration. Understand that my own circumstances could differ greatly from your own, and therefore what is suitable for me may not be suitable for you. My comments are intended to be reflection on general macro financial and economic events and trends.